Proudly created with Wix.com

PHILLIP J. ADAMS, CPA


Tel: 917-886-6321
Email: philadams@CPAforall.com​
Address: 2329 Nostrand Ave

Brooklyn, NY 11210

Contact Us
Profile and client recommendations on LinkedIn

CALL OR EMAIL TODAY TO LEARN HOW I CAN HELP YOU TO YOUR GOALS!

Publications 

My firm prepares a quarterly newsletter to all clients to keep them up-to-date on tax matters.

Below is an excerpt from our Update for October 2019.

STUDENT LOAN FORGIVENESS: A HIDDEN TAX TRAP

 

More than one candidate for President has proposed forgiving student loans, with proposals ranging from forgiving debt owed by those below a certain income level and forgiving all debt. But there is a trap lurking in Federal tax law.

Among the items listed as taxable income in the Internal Revenue Code is forgiveness of indebtedness (Section 61(a)(10)). When a lender forgives all or part of a debt owed IRS Form 1099-C, Cancellation of Debt, is required to be filed with IRS and the amount of the debt forgiven is reported and is included in a taxpayer’s income for the year the debt is forgiven (reported as “Other Income” on Form 1040).

Unless Congress, if they pass legislation and it is signed into law, makes a slight change in the tax laws to make forgiveness of student loan debts not taxable then they’ll create an unintended problem for people who have struggled to repay their student loans.

HOW TO BE SURE ENOUGH FEDERAL INCOME TAX IS BEING WITHHELD

 

Many taxpayers found that they either had a smaller refund or actually owed money when they filed their 2018 Federal income tax return. This happened because the Tax Cuts and Jobs Act of 2017 was passed so late in 2017 that IRS did not have time to revise Form W-4, Employee’s Withholding Allowance Certificate, or Form W-4P, Withholding Certificate for Pension or Annuity Payments. They simply used the forms that followed the Federal tax law for 2017 and earlier and put 2018 or 2019 on them. This meant that the amount of tax withheld was not based on the new law and caused too many taxpayers to have too little tax withheld.

IRS has attempted to fix this and added a Tax Withholding Estimator to its website (https://www.irs.gov/individuals/tax-withholding-estimator) which they expect to be useful to taxpayers to allow them to make sure they have enough Federal income tax withheld from their paychecks. It can also be used by retirees to allow them to make sure enough Federal income tax is withheld from their benefit payments.

Revised forms have since been done, with drafts released by IRS for public comment, and starting with 2020 the forms will reflect the many changes which took effect in 2018.